FRM Corporation's managers have recently introduced new, more efficient equipment for feeding chickens. Under which of the following assumptions would life cycle costing be best applied?
A) The product is being sold at a loss
B) The product is being sold at a small profit
C) The product is being sold at a loss, but expected to add to profits over time
D) The product is being sold at a small profit, which is expected to decline over time

Question

Quizplus · Accepted Answer

Life cycle costing would be best applied when the product is being sold at a loss, but is expected to add to profits over time. This is because life cycle costing takes into account all the costs associated with a product over its entire life cycle, from development to disposal. In this case, the initial cost of the new equipment may be high, but the long-term benefits in terms of increased efficiency and productivity may outweigh these costs and ultimately increase profits.

FRM Corporation's Managers Have Recently Introduced New, More Efficient Equipment